When the Rupee Shortage and the resultant Credit Crunch first hit the Bhutanese economy from early 2012 onwards, the RMA and the government were caught unaware. With elections just a year away and personal and institutional reputations at stake, both the RMA and the government blamed the financial institutions, private consumption of citizens and the private sector.
This soon became the dominant view helped by a lack of independent financial experts to give an alternate view, and media houses that lacked the adequate analytical and financial skills to closely fact check the government’s claims.
However, in the following months as the financial crisis became worse, various literature on the crises produced from multiple sources painted a more complicated but balanced picture.
One of the first reports was a BCCI report which, using detailed figures and statistical data, showed that an increase in government expenditure had a corresponding impact with higher credit growth and declining rupee reserves.
The report showed that until 2009 the government’s expenditure matched its income but from then on the fiscal deficit kept growing which also contributed to the rupee shortage. The report also mapped out the impact of hydro projects whose construction also lead to expansion in credit and rupee imports.
The BCCI report criticized the RMA saying that though the rupee problem was well known since 1993 no steps were taken by it to save and manage rupees. The report also showed that the policy of saving convertible aid money and instead spending rupees was contributing to the shortage.
The governments multi sector task force report lead by the finance ministry also pointed out that apart from credit growth and private consumption other factors also included government expenditure and RMA’s reserve management.
In addition to these major reports were various opinion articles and commentaries from various citizens.
Now the National Council’s report has not only pointed out the obvious by blaming the RMA and the Finance Ministry for the rupee shortage, but it has also asked for accountability to be fixed within these two organizations.
The NC’s rupee report in many ways has hit the nail on the head. While it is true that the basic causes of the rupee shortage were credit expansion and huge rupee imports, planting the blame on banks and citizens is not an acceptable explanation.
Banks in any country will aim to maximize profits and ordinary citizens will always aim to consume goods and services to better the quality of their lives. They will neither be aware of the big picture nor individually have the power to limit such trends.
The responsibility for knowing the goings on in the financial market and the economy and the power to take corrective measures are with the RMA and the government.
In this case both the RMA and the Ministry of Finance clearly had no inkling of the magnitude of rupee shortage problems and both organizations failed to take timely measures over the years.
On the monetary front the RMA though well aware of the rupee problem did not foresee it becoming such a big problem and failed to take any concrete measures over the years. However, it must also be remembered that the RMA until a few years back came under the jurisdiction of the Finance Ministry.
Despite an impressive manifesto the government over the last five years has failed to significantly increase exports and also develop the economy which is the main reason as to why we have a rupee crisis. The private sector has failed to take off and has instead shrunk with the current crisis. The government has failed to impress on the fiscal front and instead has gone on a path of high expenditure and budget deficits.
The NC’s report is notable not only for pointing out the facts in an unbiased manner but also urging for responsibility to be fixed.
Both the RMA and the MoF must take not only moral but also administrative responsibility in failing to see and curb this problem. One of the main principles of a democracy is accountability to its citizens. In that sense the failure of the government and RMA to take responsibility and carry out appropriate action not only insults the intelligence of the average citizen but is also disrespectful to the democratic system of checks and balances.
“Eventually we all have to accept full and total responsibility for our actions, everything we have done, and have not done.”
Hubert Selby Jr.